About Midlife, Crises and Personal Finance

Last week we held an emergency meeting to discuss the possibility of a government shutdown. I half-jokingly invited my colleagues to send comments that I would post on my Blog. During that meeting I genuinely had no plans to publish anything at all. That is until I saw some of the political debates over the weekend. I was so sickened that I had to turn the TV off. As I write this, we are 4 hours and three minutes from a shutdown. In my almost 20-year career of service this will be the second shutdown my co-workers and I have weathered.

The Republicans in Congress have done a very good job of isolating the Federal Worker. We are portrayed as people with overly generous benefits packages who do little work. I went straight from residency training to this job so I cannot speak to my benefits package as it is compared to the private sector. What I can say is that I would have made more money and amassed substantially more assets over my 20-year career had I taken my Ivy-League education and deployed it in the private sector. Whatever my health insurance and benefits package, it is the same one our members of the house have voted for themselves.

There are 800,000 federal workers. We are doctors, lawyers, law enforcement officials, we are the military, we handle disasters both domestic and abroad, we are engineers, we build bridges and dams, we are chemists, physicists, we are teachers and technicians, we are information specialists, we are security guards and housekeepers. We have mortgages. We pay our bills.

Our federal housekeepers swab the toilets and clean up the messes of the men and women of Congress who have forgotten how to govern. I spoke to a friend today, a Republican, who told me he was so disgusted by the Republican party that he was going to hand in his card.

Federal workers spend money. We make plans. The plans we make will go unrealized and the money will remain in our pockets. Can our service-based fragile economy endure 800,000 people spending only what they must while we wait for the uncertainty regarding our pay to be resolved?

Like it or not Barack Obama won a second term as President of the United states and he did so by winning the popular vote. The Affordable Health Care Act was passed into law during Mr. Obama’s first term. The Republicans who oppose it are not among the 45 million Americans who lack access to care and they never will be. Increasingly membership in the legislative branch of our government has become less about governing and more about influence peddling and power brokering. Peter Schweizer in his book, “Throw Them All Out” reveals the sad truth that the majority of Senators and Congressmen leave government far richer than when they came, truly governing and finding a way forward for America simply isn’t a priority any more. The craziness we are seeing today isn’t about the insurance mandate or the need to protect the insurance companies (Rand Paul actually said that we need to be careful that we don’t decimate the insurance companies on Face the Nation yesterday). It is about not liking the man in the White House and wanting to turn the clock back to November 5, 2012. It is about closing the sandbox because you don’t want certain kids to play there. In any other Banana Republic we would call this a coup, a situation in which one faction subverts the government because they don’t like the outcome of an election. But because the Republicans haven’t gotten in tanks, taken up arms and rolled down Pennsylvania Avenue, we don’t call it that. Instead we call it government dysfunction.

Well, I blogged about a month ago that I finally got my iPad. I am so loving this thing that it is a bit sick, really. I realized the gimmick of the thing. The accessories. I never really understood Malibu Barbie, but I understand Malibu iPad. First of all, I haven’t turned my MacBook on for anything other than the need to retrieve a file in over a month. Poor thing, kicked to the curb.

Since I bought the iPad, I have spent over $100 dollars on accessories. My compass iPad stand arrived the other night just before a small dinner party I was hosting got started. I can’t really use the word that one my friends used when it arrived. But I can say my friends think Ive gone a bit overboard. I am typing this post using a bluetooth QWERTY keyboard. Now in my defense, I happen to have two of these things lying around the house. One for the iMac and the other for the MacMini. Okay that doesn’t even sound right but I will persevere and turn this into a what works and what doesn’t for the iPad. First the case. I got a beautiful red Case Crown leather case for my iPad. As far as cases go I should have stopped there. When I was traveling in November, I thought I could use a hard shell, so I bought the speck, black hard candy case. The thing is a royal pain to use and does not protect the front the way I would like. So it is back to the Case Crown as my primary case, but because I paid for the speck, I feel the need to carry it around…and use it when I feel my iPad needs an outfit change. In April a reviewer wrote that the dock was a waste of money. It is. I found that out only after buying it! It is a good idea in that it allows the iPad to charge while vertical so you can still type on it while it is charging. But here is the rub: most iPad users, and I am no exception, like to keep their investment in its case. You cannot park the iPad on a dock and leave it in its case. You have to take it out of its case to use the dock…what a waste! While I was traveling,I decided to use my laptop case to lug the iPad, keyboard and leather case around. Way too much luggage to carry such a small item around. I now have a case crown iPad bag. I carries the keyboard, compass, both cases and charger. Apple asks that we iPad uses don’t use cleaning cloths containing solvent on our screens so I got a lens cloth. Okay soooooo total accessories:
CC red leather case
Speck black hard candy case
iPad bag
Compass iPad stand
iPad dock
lens cloth
Bluetooth keyboard which I don’t count because I already had some.

The hard candy case, sexy though it is,is a waste of money as is the dock. If Apple redesigned it so that it could be used while the iPad is still in a protective case, the dock would be more useful. Total moolah wasted???? $60 dollars.

Now what about apps? The NY Times just ran an article: 10 Magical iPad apps. Through that article I found Flipboard. This great app turns my Facebook and Twitter updates into a magazine. I can literally flip through updates in a manner of minutes. Awesome app. I have Kindle. OMG! iBook is a great way to handle PDF files, but for books, the Kindle app rocks and it’s free. I have the ABC news and NY Times apps (they are just okay). I also have pages and numbers on my iPad. Those items are the word-processing and spreadsheet applications. The cost is 9.95 each and they are worth every penny. I have a mobile me account so I can save documents as Microsoft word files and upload them to my idisk (in the techno cloud) download the same file onto another computer and keep working even while traveling and even if I choose to leave my hardware behind. For printing, I use Printopia, another app costing 9.95 and worth every penny. Apple chose NOT to turn AirPrint on with the update to 4.2. It was a functionality they pulled at the last minute. There were 3 options to deal with this: 1) download just a few lines of code off the Internet that turned the functionality on and then download another program that allows you to print or 2) buy a new printer (you’ve seen them advertised on TV) or 3) buy a program that will allow you to print to a network printer. I bought Printopia. It got better reviews than Printcentral.
Cost? 9.95 for either program. Notice a pricing theme here? Downside to Printopia? Your computer won’t go to sleep. Printopia and Printcentral download to a computer on your home network and they are always on in the background and they constantly wake your computer up and tell it to check for network activity. There is a work around that is pretty easy. Through the system preferences pane, click energy saver, then uncheck the “wake for network access” box. Your network computer will remain asleep when you put it down for the night.

Finally I downloaded Handbrake, a free app that allows you to store your DVDs in a format that iTunes can read. That means that you can load your videos into your iPhone, iPad through iTunes. I was able to travel with the LOTR trilogy, Blade 2, HP 3 and Finding Nemo.

While I was posting Deficit Unplugged, our President was compromising with Republican Leadership to create Deficit Ignored. Should we have a payroll tax holiday?…yes we should. Those tax cuts? They should have gone the way of the DoDo.

Here is, honestly, why I am concerned about the deficit. As a Nation we have promises to keep. We have the promise to our citizenry that if you work hard and use your mind, you can have a better life than your parents, in other words, we have a promise of upward mobility, yet our middle class is shrinking. For the last 75 years we have promised everyone who works that they, and in some cases their dependents, will have a safety net in old age and for the last 35 years we have promised elders some semblance of health care.

There is a risk now that all the promises will be as ashes. In truth the giveaways that I talked about in Adult Conversation are part of the problem. In order to make Social Security more appealing benefits increased and the retirement age was lowered even as the population began to see increases in longevity. In order to avoid fiscal responsibility, Social Security receipts were spent as part of the general budget. When borrowing from ourselves wasn’t enough, we borrowed from other nations.

Engineering short term budget deficits will never allow us to attack the long term budgetary issues that affect our fiscal health. We had a chance to let the tax cuts expire but now that ultimate decision has been kicked two years down the road. Our tax code is a mess, to be sure: it is over 67,000 pages of nonsense and exceptions to nonsense. TAX prep is a 65 Billion dollar industry and roughly 61% of filers use a tax prep service. Refund Anticipation Loans are a huge business in low income areas. I have lost count of the number of articles I’ve read by economists over the past few weeks who advocate reforming the tax code, collapsing to two brackets, the top of which would be lower than the top bracket under the beloved Bush cuts, and adding a value added tax. Taxing both production and consumption rather than production as we solely do now. Some of the logic for not doing these things boggles the mind: A value added tax would cause the poor to save rather than spend so we shouldn’t do it…huh??? We should preferentially tax the rich because the rich would save rather than spend….huh??? We should extend unemployment benefits because the unemployed will spend them….huh???

Since the 1970s the roots of our economy changed from a manufacturing base to a consumer base, an economy driven by spending. What did George W. Bush urge us to do after 911? He urged us to remember our patriotic duty and shop. But there is a problem with jobs based on retail and consumer spending and that problem was summed up by Lee Scott, CEO of Wal Mart: “Some well-meaning critics believe that Wal-Mart stores today, because of our size, should, in fact, play the role that it is believed General Motors played after World War II. And this is to establish this post-world war middle class that the country is so proud of. The facts are that retail does not perform that role in this economy.”

Our economy has become dependent on people spending and when they run out of their own money to spend, borrowing to spend more. No wonder we are in the mess we are in. We have become a nation of “business as usual” trying to hang on to what it has rather than pave the way forward with programs and incentives that will restore our middle class. I actually believed that there would be a push for updated infrastructure and a new power grid. It kills me that a chunk of my money every month is recycled back to the very extremist groups responsible for 911.

What do I think the President should have done? How about lock everyone in a room with the camera’s rolling rather than hammer out an agreement after hours behind closed doors? Make people responsible for their positions in public, not when surrounded by the safety of the herd as most politicians are when they make statements about the economy. He should be in my face all day every day articulating his views. That 70 minute internet only version of Mr. Obama’s 60 Minute interview was a revelation. He has sound positions but is not doing a great job of communicating them.

I am not someone that my mother would call liberal; my mother occasionally calls me Neal (for Neal Bortz and she has even called me a selfish capitalist on my own blog)…I don’t believe in using the tax code to redistribute wealth, and I believe that everyone must pay. I believe in term limits to certain safety nets like unemployment insurance coupled with sound public policy like a jobs bank and retraining. By jobs bank, I don’t mean a jobs bank that the automakers had in which laid off workers were paid substantial incomes while at home waiting to be called back to automotive jobs. No, what I mean is a database of jobs and industry trends so that people don’t have to guess what industries are fading and which ones are emerging, they don’t have to guess what the qualifications for any given job are, opening and closing dates for applications are posted and adhered to, resources for retraining are promulgated and there is funding for retraining. I believe in a national infrastructure bank with national priorities that are updated and funded and I don’t believe that public works projects should be awarded to certain companies without the benefit of competitive bidding.

What we have now is a mess. And political will only to posture rather than fix our problems.

I am afraid that the scenario that I outlined in Adult Conversation will take place. I believe that Americans will ultimately have to forgive the intra-governmental debt Social Security now holds and Americans will have to accept less. You avoid the iceberg when the tip is just a speck on the horizon, not when the berg is looming off the bow.

By kicking the can down the road as our leaders just did this week we are surely headed for tougher choices down the road.

I started this blog because of my interest in personal finance and financial freedom. Gosh, that phrase financial freedom is sooooo trite. I started blogging just before it became clear there was going to be a financial meltdown. I’ve been wondering exactly what my role in the overall economy is. I make money, I save money, I invest money and I spend it. But lately, it seems as though we are in a free-for all economy. Everyone is worried and out to get theirs.

It seems to be okay that some thrive while others suffer. Some intimate that the thriving of one group causes the suffering of another. (Certainly the financial meltdown has shown that a few thrivers have caused many to suffer) but are we really going to fall into a society so polarized that we argue that the thrivers must pay their fair share to ameliorate the suffering of others?

We live in a civil society…everyone must pay. To extend the tax cuts for everyone will cost roughly 4 trillion dollars. Extending them for the wealthiest 2% of Americans will make up $700 billion of that total. That means that the lion’s share of the tax cuts belong to the middle class. The grand total being roughly 3.7 trillion dollars. It seems silly therefore that we talk about budget deficits without considering the totality of tax cuts. We cannot target one group against the other and appear to be an intelligent nation.

In my previous posts I used a hypothetical college student as a micro example of the US Budget. Now I am going to use something more personal, me.

It is not a state secret I had major debt troubles; 30 years ago I got my first credit card, my debt increased gradually through the years until I had 16K a month revolving credit card debt. I had a house, a car, expenses and deferred student loan debt. My expense situation could be divided into immediate needs + short term debt. Lurking down the pike was the Ghost of Christmas future: long term debt + immediate needs + short term debt.

My short-term debt payments + immediate expenses were about 90% of income. I made up any short falls by borrowing, i.e., using credit cards. I knew that I had long term debt obligations that I would have to begin paying, but I was so busy being a rat on a wheel, I didn’t know how I was going to make that happen. Something snapped…I saw the light.

I adopted an austerity program. But I adopted a program that made sense. First I eliminated every expenditure that I didn’t absolutely need, that meant canceling credit cards, pre-paid calling cards, meals out. I only spent a dollar if it put food in my belly, kept clothes on my back, or put a roof over my head. I prioritized purchases, everything that didn’t fit the above categories went on a list. I needed some major help in the financial literacy department so I allowed myself to buy books on that topic…4 per month. One thing that I did do was develop a spending plan. I had to get to and from work and take call so I maintained my car. I also continued routine maintenance on my home to make sure the roof was okay and the cooling and heating systems worked. The spending plan helped me save and take care of the priorities around my home while I paid off my debts. It is important to mention that my total debt was 123% of my annual take home pay. Ouch!

It is important to understand that even while I was digging myself out of my hole, I had to continue to spend. I had to spend on housing, I had to spend on food, I had to spend on clothing, I had to spend on maintenance. When our lawmakers talk about all spending as a bad thing they are really blowing smoke. What they really should be saying is that we know we are going to continue to spend during this recession, but we only want to spend on the things we want to spend on. And there is the ideological rub.

There are the billions spent on unemployment insurance on the one hand or the trillions spent to make tax cuts permanent. The expenditure for unemployment insurance will stop at some point as the economy improves and the unemployment rate falls. The 4 trillion dollars in lost revenue through a permanent tax cut extension is, well, permanent. This debate is not about the budget it is about ideology. We have two 800 pound gorillas in the wings, the dual apes of Social Security and Medicare. The economy has forced us to talk about them at least a decade sooner than we’d like. We can’t kick the can down the road and everyone must be prepared to give something up.

I am tired of hearing that earmarks amount to a rounding error in the budget. At one end of an earmark is a Congressman or Senator who lobbied for their district, at the other end is a consituency who benefited. Everyone must pay, earmarks must stop.

It was wrong for Krugman to rail against the freeze in Federal pay. Federal employees have the most generous benefits packages around and have been receiving COLAs when others have been receiving pay cuts. Federal employee pay may be a rounding error in the budget but everyone must pay. By the way, VA and Federal employee retirement benefits were a 4 trillion unmet obligation in the Federal budget. A two-year COLA freeze will save money because it will affect retirement pay. The freeze should be extended to the military not on active duty.

I realized long before Mr. Obama was elected that my taxes were going to go up. Honestly, I’m really surprised they haven’t yet. My taxes should go up, but living in a civil society isn’t free. They should go up for everybody. We shouldn’t be discussing saving 700 billion, we should be discussing saving 4 trillion. Everyone should pay. To take the sting out of the tax increase, there should be a payroll tax holiday and reform of the tax code as Bowles and Simpson have proposed. Everyone will benefit from that.

We are in a recession, but there are still necessary expenditures. Just as I had to maintain my car and home when I was in my personal recession, we have to maintain our infrastructure and doing that requires spending money, a jobs bank requires spending money. Just as my mechanic and my plumber benefited from my maintenance plan, our citizenry will benefit from a jobs bank and infrastructure projects.